July 17, 2013

A Big Win For ObamaCare

FWIW, my guess is that numbers are probably not rigged. As the Times eventually explains, NY State had already gone through the notorious death spiral in the individual market, so ObamaCare's individual mandate and subsidies brought them out [Sarah Kliff of WonkBlog concurs]:

State insurance regulators say they have approved rates for 2014 that
are at least 50 percent lower on average than those currently available
in New York. Beginning in October, individuals in New York City who now
pay $1,000 a month or more for coverage will be able to shop for health
insurance for as little as $308 monthly. With federal subsidies, the
cost will be even lower.

Supporters of the new health care law, the Affordable Care Act, credited
the drop in rates to the online purchasing exchanges the law created,
which they say are spurring competition among insurers that are
anticipating an influx of new customers. The law requires that an
exchange be started in every state.

Well, it is not the exchanges that are driving prices down. The explanation comes in paragraph seven:

“We’re seeing in New York what we’ve seen in other states like
California and Oregon — that competition and transparency in the
marketplaces are leading to affordable and new choices for families,”
said Joanne Peters, a spokeswoman for the Department of Health and Human
Services.

No, that isn't it either, but for Times readers, isn't it pretty to think so? One last try, paragraph eighteen and following:

For years, New York has represented much that can go wrong with
insurance markets. The state required insurers to cover everyone
regardless of pre-existing conditions, but did not require everyone to
purchase insurance — a feature of the new health care law — and did not
offer generous subsidies so people could afford coverage.

With no ability to persuade the young and the healthy to buy policies,
the state’s premiums have long been among the highest in the nation. “If
there was any state that the A.C.A. could bring rates down, it was New
York,” said Timothy Jost, a law professor at Washington and Lee
University who closely follows the federal law.

Mr. Jost and other policy experts say the new health exchanges appear to
be creating sufficient competition, particularly in states that have
embraced the exchanges and are trying to create a marketplace that
allows consumers to shop easily.

Earlier in the story, these estimates were offered:

The new premium rates do not affect a majority of New Yorkers, who
receive insurance through their employers, only those who must purchase
it on their own. Because the cost of individual coverage has soared,
only 17,000 New Yorkers currently buy insurance on their own. About 2.6
million are uninsured in New York State.

State officials estimate as many as 615,000 individuals will buy health
insurance on their own in the first few years the health law is in
effect. In addition to lower premiums, about three-quarters of those
people will be eligible for the subsidies available to lower-income
individuals.

So the mandate and the subsidies are greatly expanding the pool of buyers and ending the death spiral, in which only the sickest and the wealthiest bought insurance prior to an actual need. This is not a matter of creating new competition, it is a matter ofmandating (and subsidizing) new customers.

MORE: Avik Roy of NRO thinks the Times is misoverestimating the current cost of individual insurance in NY.

Is it cheaper for the people who now don't buy insurance but will be forced to or pay a fine? They are the ones who will be subsidizing those whose rates go down, if indeed they do. And let's not forget the explicit subsidies that will be paid by taxpayers.

The new premium rates do not affect a majority of New Yorkers, who receive insurance through their employers, only those who must purchase it on their own.

Wait until the employer mandates kick in. Then the new premium rates will affect a whole lot more people who will find themselves no longer insured by their employers, or no longer (fully) employed at all.

That said JimmyK-- we do have to acknowledge that there are some "winners" from ObummerCare-- immigrant doctors and healthcare union workers who are the recipients of the massive MedicAid expansion, and mass employers like Costco who can dump their employees into exchanges. Crony 'winners' to be sure-- the rest of us worker/TPs, and retired Worker MediCare beneficiaries we're the losers-- big time.

Porch-- in stupid health insurance markets like NYS (gigantic mandates and no out of state policies allowed so no competition) the effect of ObummerCare won't be on premiums, but the effect will be as you suggest, NYS employers dumping workers into the State Exchange or making the workers 30 hr 'part-timers'. The Lib sheeple here will be shocked at what happens to them-- especially 'Nonprofit' entity workers.

I infer that you mean that unlike New York State the Feds don't mandate gold-plated wheels and a mink-covered steering wheel on the Cadillac coverage, so the Silver and Bronze federal plans can be cheaper, excuse me, more value-oriented.

A good point. But forcing people to buy something (and subsidizing many who do) is still the main price driver here.

TomM@12:09 -- acknowledged and agreed. As I mentioned in a comment to jimmyK, there are a few 'winnahs' in ObummerCare and NYS is one of them, because its pre-existing' State Insurance laws were screwed up more than ObummerCare.

Of course there are always some "winners" when government gets involved in micro-managing a market. The usual pattern is a small number of well-connected big winners (supporters of the party in power), and a large number of modest losers, many of whom may not recognize the true source of their losses.

I meant to add: I put "winners" in quotes because the gains may be short-lived (as with the people who thought they'd won in the subprime mortgage scam), and essentially a bigger piece of a shrinking pie (see Greece).

JimmyK-- Ben B and NY Fed pres Bill Dudley say energy/food prices are transitory, and Tablet prices are down, so inflation? NOT TO WORRY-- QE may taper someday, but it will continue to infinity and beyond!

I unfortunately live in NYS, and we pay (through my wife's employer) $300/mo for family, not individual, insurance, but we only pay 20% with the employer paying the other 80%. That means that the monthly cost of our family plan (which can't be varied; it's not a cafeteria plan) is $1,500 per month, or $18,000 per year.

And this is GROUP insurance, which everyone knows is cheaper than individual insurance.

So I have to wonder where Avik Roy is getting his numbers from. Individual plans can't be THAT much cheaper than family plans.

Umm, maybe the numbers are rigged. If they are forcing new entrants into the marketplace, then the health plan cost for them just went up (unless 100% subsidized). I suspect if you include all those zeros in the equation on the pre-ACA side, then health plan cost on average, or median, would not be falling 50%.

Another idea in non-static analysis: I'm guessing another major source of new individuals in the individual plan market are those whose employers dropped their coverage and are now forced to buy on their own. So the market is getting much bigger from both newly mandated insured, and those formerly insured by an employer plan.

Interesting that the $1000 pre-ACA will fall to "as little as" (so, not average) $308. That's about 1/3rd. Interesting because the community rating ratio set by ACA is 3:1 (old/sick vs young/healthy). So the cheapest plan (for all those young people) can be no less than 1/3rd of what those higher-risk older people currently in the individual market (with guaranteed issue in New York) will pay.
Boom, force a ton of new people in the market with 1/3rd of the cost (statically, in reality the bottom and top rates will find some new equilibrium) and average costs go down 50%. But I doubt that people currently in the market will see their rates go down 50% -- I bet 20-30% at most, and primarily thanks to the new community rating ratio holding the maximum levels down.

The other question is whether the Times talked to the realistic insurance companies -- you know the ones who are NOT ramping up operations in the state because they have figured out that the uninsured are just going to pay the fine and there isn't going to be any big group of healthy uninsured who are going to sign up to pay premiums...

The solution to this problem is obvious. Have all these brave, open-minded liberals walk down the streets of Chicago in the middle of the night to demonstrate how magnanimous they are. We would solve two problems at once; prove them wrong and rid the world of a few idiots.